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Buying Groups Grow Share Amid Tumultuous Marketplace

The last seven months have been an unusually tumultuous time for the CE and majap industries, as flat-panel pricing nose dived and a soft housing market stalled white-goods sales.

While marketplace mayhem has taken a toll on some national and regional chains, the independent buying groups bucked past predictions of their decline and actually gained ground amid the turmoil.

How'd they do it? Let us count the ways:

Through consolidation, which provided strength — and buying clout — in numbers;

through specialization, in the form of assorted specialty A/V, rent-to-own and home furnishings divisions;

through centralized marketing programs to drive traffic; and

by providing discounted services and council to members.

Key to that mix is the personalized service that independent dealers provide on their assisted sales floors, which has become ever more critical as brown and even white goods grow more complex and interdependent.

The following overview examines the latest strategies and initiatives of the five major CE and majaps buying organizations (NATM coverage begins on p. 1), plus 2006 sales volume and contact information for each (including Mega Group USA/Best Brands Plus, which is primarily a furniture group).

Nationwide Marketing Group: According to president/director Ed Kelly, Nationwide grew its market share last year by surpassing industry unit sales averages in both CE and majaps, and service was the key.

"The consumer wants assisted sales," Kelly observed during the group's recent PrimeTime! convention, given the plethora of new technologies and product choices. "They're demanding to be taken care of."

Mike Decker, the group's electronics marketing VP, projects that Nationwide's CE unit volume will increase 10 percent this year over 2006 totals, compared with industry forecasts of a 1 percent increase in unit shipments year over year.

"We'll achieve this," he said, "through improved and aggressive pricing from our strategic vendor partners, which will give us an advantage in the marketplace against big-box retailers." Nationwide will also leverage "growth opportunities" in flat-panel TV, audio, satellite systems and recordable DVD. In particular, "HD DVD recordable with the Toshiba camp will be [a] terrific opportunity within our membership base," Decker said. "I also expect we're going to have a strong year in audio to complement the sale of flat panel."

Kelly added that dealers can also leverage the group's furniture prowess to balance flat-panel price declines by offering customers cabinetry in which to house plasma and flat-panel TVs.

New initiatives for 2007 include sourcing, repair and in-store marketing services. The sourcing component is comprised of the group's first buying office in China, which opened recently in Shenzhen, and the hiring of two agents based there and in the U.S.

On the servicing front, Nationwide is launching an expanded service and repair program that will leverage the group's more than 1,000 servicing members and its buying power on parts.

Nationwide's third initiative, dubbed MediaDirect, provides proprietary high-definition content for dealers to run on their HDTV displays.

Brand Source: Brand Source/AVB is stepping up its advertising and marketing efforts to build brand awareness, drive traffic and increase market share amid the sluggish sales environment. To that end, the group will build upon a multimedia marketing strategy that includes tabloids, TV, sponsorships, Internet efforts and its private-label credit card in order to get the Brand Source name before female consumers.

Brand Source, along with Fisher & Paykel, will also be primary sponsors of "Re-New Orleans," a seven-part, half-hour series documenting their efforts and those of others to rebuild a new community center in the hurricane-ravaged city. The show is slated to begin airing on the anniversary of Katrina on The Discovery Channel, although it may also be picked up by one of the broadcast networks, CEO Bob Lawrence said during the group's Spring Summit in Dallas.

Online, Brand Source is retooling its Web site to enhance navigation, provide product specification pages and side-by-side product comparisons, improve the appearance of online circulars and upgrade backroom functions, the group said.

Marketing efforts to date have made Brand Source the fourth most recognized major appliance brand and the fifth most recognized name in consumer electronics, Lawrence noted. Brand Source also gained significant market share in 2006, with majap sales increasing 10 percent compared with industrywide growth of 0.7 percent, and CE sales rising 30 percent compared with that industry's 4 percent hike, he said.

Lawrence added that the recent wave of store closures by major national and regional chains creates an opportunity for Brand Source dealers, "but we have to get that customer into our stores."

Meanwhile, Home Entertainment Source (HES), the specialty A/V division of Brand Source, is narrowing its focus on select SKUs from its core video vendors to secure "sharper deals and more marketing support," said general manager Jim Ristow said. HES is also moving forward with a group branding program, akin to Brand Source, that will provide members with standardized Home Entertainment Source signage and advertising and marketing material. Lawrence said the HES branding effort will take seven to 10 years to fully implement.

PRO Group: The Progressive Retailers Organization (PRO Group) is launching a series of initiatives this year to better align the high-end A/V buying group with changing industry dynamics.

Among the group's first actions is a new one-step virtual distribution model that will allow PRO to conduct business with vendors as a single customer. "We'll have one set of forecasts and one set of numbers," explained executive director Dave Workman earlier this year. "Ship to one, spread to many. This will take costs out and establish PRO as an alternative channel of distribution to Circuit City and Best Buy."

The group, which recently welcomed 18th member Home Theater Store, will also move aggressively into IT-based content distribution, including convergence and connectivity products, to "bring the Internet to life," Workman said. "No one has their arms completely around this yet but we have to be great at that stuff."

In addition, PRO has begun developing a targeted marketing program aimed at delivering select products and offers to its members' most profitable customer segments. PRO launched the initiative by tapping marketing services company Claritas to collect, analyze and segment customer data culled from member dealers' files. Claritas said the analysis, which is being funded by an unidentified major CE vendor, will drive more foot traffic into members' stores by using "precision marketing capabilities to target their most valuable consumers with products and offers that are attractive and meaningful to them."

PRO will also begin offering members customized training services to enhance the dealers' own training programs through an exclusive contract with Consumer Electronics University (CEU), an independent training firm.

The group is holding its annual spring meeting this week in Scottsdale, Ariz.

HTSA: Home Theater Specialists Association (HTSA) has identified five categories, including furniture, control and automation, networking, audio and lighting, that offer significant profit potential for the group's traditionally video-centric dealers.

According to executive director Richard Glikes, the group's expanded focus is a necessary adaptation to a changing marketplace and a survival strategy for an organization whose current business model is extremely dependent on the video market. He also sees tumbling flat-panel prices as a wake-up call for change.

"Basically, we can't be in the $999 for a 42-inch TV bracket," Glikes told TWICE during the group's spring meeting in Savannah, Ga. "It's not our customer and nobody is making money there anyway."

Other goals for the organization in 2007 include continuing to focus business on existing vendor partners, improving communications, improving HTSA's suite of services and staying ahead of industry trends.

HTSA is also abandoning its traditional marketing model, which consisted of conventional direct-mail campaigns and newspaper advertising, in favor of an increased Web presence through its consumer site, and the production of quarterly custom magazines to be sent to consumers. He said the new approach will allow the organization to "attack the luxury market from a different angle."

New vendors include TiVo, Touchstone Home Products and Sligh Furniture. The recent additions of A/V Excellence, Jamieson's and CSA has brought its member ranks up to 57.